The new rules for gift cards – what you need to know
If your business offers gift cards for customers, there are new laws coming into effect that will offer uniform standards under national regulation.
In Australia, around 34 million gift cards are sold each year with an estimated value of $2.5 billion. On average, an estimated $70 million is lost because of expiry dates. Given the high dollar waste and lack of national standards or regulations for a minimum length of time to redeem them, individual states took action to legislate a minimum three-year expiry period.
Applying from 1 November 2019, new laws are in effect that introduces a regime for the regulation of gift cards including:
- A minimum 3-year expiry period
- Bolstering disclosure requirements, and
- Banning post-supply fees.
If you sell gift cards, here's what you need to do
From 1 November 2019, businesses should ensure:
- All gift cards have a minimum three-year expiry period. Any existing gift card stock should be run down and production reviewed to ensure that once the new regime comes into effect, only compliant gift cards are issued.
- Ensure disclosure requirements are met. The expiry date or the date the card was supplied and a statement about the period of validity must be set out prominently on the gift card itself. For example, if the supply date was December 2019, "Supply date: December 2019. This card will expire in 3 years," or "Valid for 3 years from 12/19". It is assumed that the card expires on the last day of the month where only the month and year are displayed. If the gift card does not expire, the card will need to clarify this by stating words to the effect of, "never expires".
- Post-supply fees are not charged. A post-supply fee is a fee that is charged reducing the value of the gift card such as administration fees for using a gift card. Post-supply fees exclude the fees that are normally charged regardless of how someone pays for a product or service. For example, booking fees, a fee to reissue a lost or damaged card, and payment surcharges.
A number of larger businesses have adopted a three-year expiry period following the introduction of NSW laws. These include:
- David Jones
- Rebel Sport
- Coles, and
Other retailers have no expiry dates including iTunes, JB Hi-Fi, EB Games, Woolworths, and Bunnings. Generous expire periods are a point of difference when consumers are working out which retailers gift card to purchase.
What happens if your business ignores the new rules?
Once the new rules come into effect, if a gift card is supplied with less than a three-year expiry period, the disclosure requirements are not met, or post-supply fees are charged, a penalty may be imposed of up to $30,000 for a body corporate and $6,000 for persons other than a body corporate.
In addition, the ACCC has the ability to impose infringement notices. Each infringement notice is 55 units (currently $11,500) for a body corporate and 11 units (currently $2,420) for persons other than a body corporate.
What happens if your business becomes insolvent or is sold?
The consumer's rights do not change if the business becomes insolvent or bankrupt. The consumer becomes an unsecured creditor of the business. If your business changes ownership, it's the new business owner's responsibility to honour existing gift cards and vouchers if the new business was"
- Sold as a 'going concern'. That is, the assets and liabilities of the business were sold by the previous owner to the new owner.
- Owned by a company rather than an individual, and the new owner purchased the shares in the company.
Check with your accountant about how to account for gift card revenue
Gift cards revenue is valuable to business but you should check with your accountant that you're including the revenue and redeemed vouchers in your accounts properly. Contact us on 02 9957 4033 for more information.
*Amendments to the NSW Fair Trading Act 1987 require that most gift cards and vouchers sold from 31 March 2018 have a three-year expiry period. In addition, no post-purchase fees can apply to redeem the voucher (including activation fees, account keeping fees, balance enquiry fees, telephone enquiry fees and fees applied when a card is inactive or not being used). See Fair Trading for more details.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.